Jaffe: Don’t Ignore Those Annual Reports

Do you read annual reports? If you don’t, you’re not alone. MarketWatch’s Chuck Jaffe discusses what to look for on MoneyBeat.

This transcript has been automatically generated and may not be 100% accurate.

... been been been been BdB ... a shareholder proxy season is coming up in the ... Western for you ... do you read the Annual Report to tell you not alone ... MarketWatch's Chuck Jaffe really knows exactly what to look for he is here to share it with a shot hell are you ... and are well thanks for having me ... on so many feel the tree again or annual reports assist dispense with that ... why don't they read it are they making a mistake ... well they don't read because there's hundreds of pages and most of it is and legal jargon in fact ... I think that the business world wants us not to read these reports ... because that way they can hide a lot of the inerrancy and oh by the way you assumed the risk and it was your fault that you ... don't want this even know what you're held etc you know when you get reports that are a hundred and thirty pages ... Yeh that's pretty daunting ... and I don't blame folks for not wanting to read ... at the same time you definitely wanna take a look at least a couple of things ... because the interesting thing is that we spent all this time talk about what a Stockton where the market do today in what's going on ... and that measures a point in time like right now ... but the annual report ... it's basically helping you think that is this an entity that I want to all ... and if you're not a trigger but an investor in you're buying a business started thinking about the Warren Buffett way ... well ... this is where you want it we sort of make sure that yet I still want to own this business right ... so ... what he's been ... opinion column ... in the coming out of the key thing what the key things to look for in the annual report say on the way to Launder some odd pages ... well I would say that the things you wanna look out most to things like ... the letter from the chief executive ... you might get a sense I mean it ... making excuses or the talk him in charge and the talking in circles what's there wanna do is just a little bit of looking at the balance sheet income statement it doesn't have to be that you analyze the numbers a lot ... but ... you know our sales up or down from last year ... is set up or down from last year that you see that sales go down and profits go down and cash flow is reduced ... and debt is up ... you better have an explanation as a company can overcome that for awhile what eventually Wall Street's gotta figure it out and you don't wanna be left on the bad when it down ... the ... port obviously another thing you wanna look yet ... been interesting about the auditor reporters it's the one thing that you really don't wanna read and understand your just looking for them to say ... Hey ... in ... fairly represented accurately represents that the financial statements and if you're seeing a company ... that is your changing auditor's ... for arguing with its accountants over anything ... that's when you wanna go who they don't trust these numbers ... and so you might at that point you looking but ... the auditor statement is Your literally looking for one line in the middle of a ... paragraph or so boilerplate that says fairly and accurately represents the statement the company's ... conditioning until ... the last thing I look at the shareholding of some Boeing responsibilities you should address this ... yet but there's a bigger thing here if you throw away all the stuff that comes to you you was the kind of investor who theoretically could get lost ... meaning at some point near an active on the company and moved in you forgot to tell ten shares of XYZ company ... by devoting your proxies not only are you doing the right thing is a corporate citizen ... but you're maintaining contact with the company ... and that makes it harder for them to one of the dollar this is an inactive Account ... Willis GE shares over the state has trust me ... you or your heirs can not ever wanted in a situation we gotta go clean your money again because it's been turned over to the state right so ... do the right thing Booker proxies and it does give you some protection ... high shop great